tax system

Take some money from the wealthy, give it to the poor -- why not do it? Basic accounting suggests that another $1,000 for a student with a $10,000 yearly income puts them further ahead than the same amount does for someone earning $100,000. After all, it gives the student a boost of 10 per cent, and the affluent person only one per cent.

In Canada, the small amount of income redistributed to the poor has long been a matter of public debate. Lately, the poor have been losing. The low-tax, small-government crowd, both Liberal and Conservative, have had control of the federal government for decades.

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Rachel Notley led the Alberta NDP to victory on May 6 calling for higher taxes on corporations to pay for more teachers and better health care. Interestingly, in 1990, Bob Rae led the Ontario NDP to victory pointing to corporations that paid no income tax.

The federal NDP is calling for higher corporate taxes, hoping it will become an election issue in October, a rallying point for Canadians fed up with the underfunding of health care, and other government services.

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There is some discussion in Nova Scotia about the possibility of the government introducing a carbon tax in the next budget. In this blog post I will introduce the context within which these discussions are taking place, and make reference to other blog posts in this forum that provide insights into how the province might best approach a carbon tax policy.

Imagine for a moment two societies living side by side. One has discovered and uses the wheel effectively -- a technology that makes life easier for workers and boosts the economy for everyone. Prosperity reigns. The society next door is well aware of the wheel and watches as its neighbours move inexorably ahead -- wealthier, more efficient, healthier and with more leisure time for cultural activities. But it is not those who do the work in this society who reject the wheel -- it is the governing elite, the priests, the official advisers and scribes who have incorporated a moral objection to the wheel into the state religion. Use of the wheel is thus proscribed by faith, not reason. All practical arguments in its favour are rendered useless.

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Another big report, another display of our witlessly shallow politics, which this time has outdone itself almost to the point of comedy in its haste to pour sulphur on the head of Laurel Broten and her tax and regulatory review.

Tory Leader Jamie Baillie comes up with the ultimate neo-con cliché ("job-killing carbon tax") and sees nothing but "major tax increases" and a retro attempt to "tax our way to prosperity."

A colleague of mine pointed out a relatively new paper about the distributional impacts of B.C.'s carbon tax. In my work, we look at actual energy expenditures by different household groups, and because lower-income groups spend a greater share of their income on (carbon-intensive) energy, any carbon tax is regressive. But that regressivity ultimately depends on what you do with the revenues, and can be compensated with a credit. In B.C.'s case, when the carbon tax was instituted, there was a decent low-income credit that made the overall regime progressive, but as the tax increased from $10 to $30 per tonne, the credit did not keep up, and the current regime is regressive.

The Nova Scotia Tax Review released this week lacks an analysis of the impact its tax changes will have on Nova Scotians. Who would benefit? A simple distributional analysis of different income groups would give us some information. Not available. (Informative to check out the analysis we did for the Hamm government's proposed cuts back in 2003 -- by income level and by gender and county.)

Recently, the Canadian Federation of Independent Business received some media attention for their report on the relationship between residential and business property taxes in Ontario.

While a step up from the norm (this report is based on some actual data as opposed to a survey of the views of its members) that the CFIB would whinge about taxes is not new, nor is the fact that their results are misleading and contradictory.

Essentially, the CFIB makes one point: that business (commercial and industrial) property tax is higher than residential property tax.

Here's something else that would advance our cause in Nova Scotia if we could only talk about it without the pious platitudes: taxation.

As it turns out the provincial government has its Tax and Regulatory Review on the case. This could be a very useful exercise if it actually goes to the root of the matter. But will it? Or is it meant to chow down on the prevailing dogma: that the only way forward is to reduce taxes, especially business taxes, and to avoid at all cost the heresy of topping up taxes for the highest earners.

Hopefully the review committee, led by public policy expert and former Ontario cabinet minister Laurel Broten, will take account of the problems with this creed.